Dear Mr. Carr –
Regrettably, your article is filled with statements that are outright false. Consequently, you paint a false picture of an industry and a credit product that has found acceptance by over 12 million people annually, for over 22 years. I’d like to correct several statements you made.
Loan Sharking is an illegal lending enterprise, run by a criminal element, that can result in personal injury. Usury is defined as an excessive or exhorbitant rate of interest.
Payday loans are not loan sharking nor are they usurious. I have tackled this definition before.
Payday loan companies are no longer growing. In fact, the industry has been shrinking over the past several years. Thus it is highly unlikely a payday loan store will be coming to a location near you.
Payday loan companies do NOT partner with banks. Your information is wildly outdated. Payday loans are permitted in states that have passed legislation specifically permitting their operation.
Payday lenders are NOT in “every state”. They are in 31 states.
APR is irrelevant as a measure of expense, because loans are for two weeks, not one year. Furthermore, borrowers use a flat pricing signal to determine whether or not to take out a loan. They look at the actual money it will cost them for the loan. Have you ever bounced a check? Suppose you bounce a $30 check and get charged a $30 NSF fee and $30 merchant fee. Do you scream “USURY!” because of the 73,000% APR? No, you get mad that you got dinged for sixty DOLLARS.
You claim, “In most cases borrowers are borrowing money without the means to pay back the loan. ” This is false. 94% of all loans are repaid on time, a figure verified by the SEC filings of payday loan companies. This also negates your claim of the “never ending cycle of debt”, a myth perpetuated by people who do not know the industry.
You do, however, make one fantastic point that I agree with, and champion. Whenever possible, people should form a personal financial plan and attempt to manage expenses to avoid having to take out any kind of loan. Regrettably, in today’s economy, that isn’t always possible and emergencies do arise.
Please do yourself and your readers the favor of researching a topic thoroughly before writing about it. I offer myself as a resource.
PDL Capital Inc.